Bond market sentiments remained subdued throughout the week ending April 22, 2005. The yield on the benchmark 2015, 7.38 per cent GOI bond closed at 7.06 per cent on April 21, up eight basis points over its previous week's close of 6.99 per cent.
The yield touched an intra-week high of 7.09 per cent on April 20 when the benchmark price touched a low of Rs 102. Debt and money markets remained closed on Monday and Friday on account of Ram Navami and Mahavira Jayanti, respectively.
Highlight of the week was the government auction worth Rs 7,000 crore, beginning April 19, 2005. The sale included 8.07 per cent, 2017, government security for a notified amount of Rs 5,000 crore (nominal) and the sale (re-issue) of 7.50 per cent, 2034, government security for a notified amount of Rs 2,000 crore through a price based auction using multiple price method.
However, the auction received a good response from traders, taking cut-off prices higher than the expected levels. The RBI set the cut-off price for 12-year 8.07 per cent government stock, 2017 at Rs 104.50. While, for the 29-year 7.50 per cent government stock, 2034, the cut-off price was set at Rs 94.95.
The average volume on the wholesale debt market was at Rs 3388.21 crore, higher than previous week's average of Rs 2541.93 crore.
The WPI inflation touched a 12-week high of 5.48 per cent for the 12-month ending April 09, 2005, as against previous week's figure of 5.26 per cent. Price escalation in vegetables, fruits, cooking gas and edible oils were largely responsible for the rise in inflation.
Oil prices headed northwards during the week with Brent closing at US dollar 54.65 per barrel on April 22, 2005, gaining over its previous week's close of US dollar 51.55 per barrel.
Call rates hovered in a narrow range throughout the week before finally closing at 4.70-4.80 per cent on April 21, 2005. The cumulative borrowing and lending figures as on April 20, 2005, in the call money market stood at Rs 11585.93 crore and Rs 11585.93 crore on a weighted average rate (WAR) of 4.78 per cent and 4.78 per cent, respectively.
At the repos/reverse repo auctions held on April 21, 2005, the RBI absorbed Rs 31,745 crore through 36 bids received at the four-day reverse repo auction. It maintained the cut-off rate at 4.75 per cent.
Rupee closed at 43.75 per US dollar on April 21, 2005, gaining over seven paise over previous week's close of Rs 43.82 per US dollar. However, during the week rupee traded in a narrow range.
Outlook
Sentiments in the debt market remain wary ahead of the Annual Policy Statement to be released on April 28, 2005. Results of the ongoing auction that is scheduled to end on April 26, 2005, would be crucial in deciding the future direction of the debt market. International crude oil prices would be watched keenly.
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